pain and stress is the only thing you have to lose. get it and get it now. your body will thank you. (announcer) find out more at aerotrainer.com. that's aerotrainer.com. ♪ >> the pandemic is definitely coming under control. economic activity is actually returning to normal. >> there is kind of still this catch-up happening in correcting to the covid stock. >> we are still kind of flying blind here. this is quite different than the financial crisis. >> personally, jay powell and the fed have been doing the right thing, and if anything, they will have to do more. >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz.

tom: good morning, everyone. a simulcast, bloomberg radio come bloomberg television. with the mega lift we got friday afternoon, i had already checked out, but it was a real move. the theme of it, the bull case continues this monday morning. jonathan: it does continue. i think peter tchir of academy securities asking the right question this morning. it is not about whether we will get a boom. it is about how big will it be and how long will it last. they are the questions we will be debating for the next couple of months. tom: we heard it from david kotok on the equity market earlier. we will hear from tony rodriguez of nuveen on the equity market. -- on the fixed income market. jonathan: what are we a couple months into 2-21?

we've already seen these big moves before the recovery has even got started. i'm already thinking about retail sales this coming thursday. those numbers are set to be big. noticed bank of america looking for 11%. carl riccadonna looking for something in and around 10%. tom: my good friend. jonathan: my good friend, lisa's good friend. not just your good friend. [laughter] tom: what is so important about this, when you split apart yield dynamics, it is about a belief in all that is good in america, and a credit quality that maybe we have never seen. lisa: i am struck by the lack of visibility, especially in this area. the dynamic of inflation and the concept of transitory, and your question with vice chair clarida really highlighting that they are hoping to wait. they think they can wait, they have the tools to adjust inflation if they get it wrong

and it heats up too much. i am struck by labor shortage is by supply disruptions, shipping costs remaining at the highest levels ever. over the next 12 months, how is this going to translate into transitory? tom: i'm sipping. jonathan: are we playing a drinking game? [laughter] tom: on radio, i am taking my third sip. lisa: just talk and drink at the same time on radio. tom: what is so important here about transitory, there's a bet made by the fed in this show made by the white house. jonathan: it is, and jared bernstein saying it will be transitory. i think that is a conversation in the white house we've got to have in the coming months. they want to shape the narrative because they still got some work to do. one of those big efforts is around the infrastructure bill. if you start to see a

conversation about inflation run away from this transitory space and we start talking about something a little more sinister , i think it could harbor to spend more money at the treasury. anyway, i think it gets more difficult for them. the question i asked yesterday -- tom: no, not the big question. the question is in a bloody mary, do you lead with jen or vodka -- with gin or vodka? jonathan: i think with gin. i may gin kind of guy. when we spoke to the vice chair richard clarida on friday, i think the important point in that conversation was how will they know when they are wrong, if they are wrong. until year end -- tom: year-end is past the second quarter. let's get through the transitory

data here as quick as we can. negative eight on futures. to me, it is not much of a pullback from where we were friday. jonathan: all-time highs in friday's session put about 0.2% on the s&p 500, 41 12. when these year-end forecasts were put out at the back end of october, early november, 4100 sounded like a moonshot. it made huge headlines. now here we are in the s&p bang on in the midyear target on the s&p 500, just a couple of hundred points away. tom: quite absence in the commodity market as well. as we mentioned optimism about equities, toned router guess -- tony rodriguez is with no been -- with novena -- with nuveen. tony rodriguez, your ever

optimistic here about the credit quality. do we under estimate the goodness of the recovery in america? tony: i do think there is some underestimation of the quality of the balance sheet. we are looking at 20 have percent higher earnings and cash flow growth. when you look at what companies did basically throughout 2020, they really 45 their balance sheet. they borrowed a lot, but they kept a lot of cash on the balance sheet. we are expecting a significant paydown of that debt where you might get one full term of leverage decline this year in the high-yield market. balance sheets are going to be very healthy, and our view, and from that perspective, while we certainly think it is pretty

full, we think it is justified by the reality of the improvement of the fundamentals. tom: i'm going to suggest a increase in buybacks and dividend yield increases. jonathan: we had a ton of supply, and the numbers this year are set to get bigger. the numbers are one thing. what that money gets used for is another. how much of that is just for financing? tony: we are seeing numbers that would indicate something like 70% to 80% is free financing. so companies have been able to extend out the debt, which is clearly very critical. but in addition to that, all of the cash they have built up facing the uncertainty in 2020, that really starts to bring down the leverage, and that is a big reason why we see default

forecasts bringing them down in many cases to as low as 2% on a trailing 12 month basis by the end of this year. those are almost record lows. lisa: this makes sense when you look back six months, but there seems to be discipline too much and sneer record high, but if you look back beyond the immediate pandemic times, these companies still look highly leveraged. is there some sort of reckoning waiting for these companies pass this era when they actually have to start paying it down in real times? the maneuvering they did during pandemic times to stay alive? tony: when we look at long-term averages, we look at cash flow, we see numbers coming back down into that range, meaning in a

long-term historical average range, so that tells us that the rules market, we don't believe is a significant risk of dislocation just from the level of debt. the dislocation would come really more from a surprise inflation, a much weaker growth outlook, potentially negative outcomes on whether it is this or that vaccine, or motor -- or more of a fundamental driver of weaker growth. companies have been able to restructure their balance sheet to be able to extend their maturities, pushing back in a near term that is often a big risk in the market from a liquidity perspective. jonathan: just a final question for me. margins could be an issue this year, and margins will be in focus in the next couple of weeks when we get the earnings as well on the cost side of things. how closely are you were at that right now? tony: very closely, and we

clearly expect there to be some cost pressures, particularly in the middle of the year as we head towards the end of the year. whether it is from not only a goods perspective, and i will admit what we think will be a big surge in services demand. we will look to see whether that is just a transitory short-term pressure and what the outlook will be for 2022. right now our view is that the market pressures will be transitory, and you get back to an equilibrium level of really still pretty supportive margins from a debt perspective. jonathan: london getting drunk on this program quickly. this tricking game is really getting to us, isn't it? [laughter] you take the bloomberg down to the pub garden, transitory your

buzz word of the morning. tom: while you were talking to tony, a great conversation, ibm out. member the day that jerry side named ira concannon primerica. and we were all like, primerica. ibm has announced that their slower growing infrastructure business, they want to get rid of it. it is going to be can real -- going to be kim -- going to be -- going to be kyndryl. jonathan: what is the feeling now in new york city? everyone wants to come back tom: -- wants to come back. kyndral. lisa: can you imagine --.

jonathan: they are thinking, no one will notice. there's the word there, kyndr al. coming up, greg valliere, agf investments chief u.s. policy strategist. equities down seven, down 0.2%, pulling back from record highs. this is bloomberg. tom: maybe kyndral can get naming rights to tottenham -- maybe kyndryl can get naming rights to tottenham. ritika: fed chair jerome powell told "60 minutes." at the coronavirus is still a threat. he said it would be smart for people to continue to visually

distance and wear masks. more than dozen ceos is companies are desperate for chips -- ceos of companies that are desperate for chips went to the white house. border makers -- regulators have said that the first significant guidance for the financial tech company since it halted its ipo. the pboc also cited record competition and to discourage a monopoly. bloomberg has learned microsoft is set to buy nuance communications in a deal with an equity valuation of about $16 billion. microsoft has been working on ai software that helps take

doctor-patient conversations and integrate them into patient portals. global news 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i'm ritika gupta. this is bloomberg. ♪ is bloomberg. ♪

♪ > we don't have a lot of work to do to persuade the american people that u.s. infrastructure needs major improvement.

the american people already know it. that is one of the reasons why there is such extraordinary support for this package among the american people. jonathan: pete buttigieg, the transportation secretary, on fox news sunday. alongside tom keene and lisa abramowicz, i'm jonathan ferro. let's get to the price action of this monday morning, kicking off a busy trading week for you. tuesday inflation, thursday retail sales, the banks on wednesday reporting earnings. futures down eight points, down 0.2%, pulling back from record highs. holding onto that 4100 handle on s&p 500 futures. yields up a single basis point, just a lift in the last hour or so on the 10 year treasury. 1.67% on tens. tom: i like the idea of no drama. that is really what it feels like. there's a lot of information to come.

jack is watching. thanks, jack. jack is liking the idea that we have transitory moments this morning. jonathan: is he? let's let the audience know what is going on. for the next nine months, the only word you will hear is transitory, and it has become a drinking game. in honor of london opening and going back to the beer gardens, these companies have something else this morning, and that is the drinking game. lisa and i thought we might include ourselves in this effort. tom: al from new jersey, i think he's the one that lined this up. it's not 18 years, i think it is 18 hours. let's continue with greg valliere. he knows the drinking game at the willard hotel in london. you go into the cozy bar there, and there's four other establishments -- in washington, i should say. the big mystery right now

is how do we migrate from $2.25 trillion down to whatever the number is going to be? greg: i think it is a tweak. i think there will be some reductions. think the republicans will be 100 percent united, and a couple of democrats, including joe manchin, will not agree to $2.25 trillion. i think the final number will be around a mere $1.8 trillion. tom: what is your response to people that add up stimulus one, two, three, four? what is your all in stimulus number? tony: all in was probably 6 -- greg: all in is $6 trillion in

fiscal. you've got a fed chairman who's basically promising the rate hikes. it is not a surprise this economy is about to blastoff. jonathan: are you taking bipartisan talks seriously in washington? greg: no, i don't think so. there will be the pretense of bipartisan talks. they will say they want to get along, but biden has very suddenly changed his rationale here. it is not bipartisan among members of congress, it is bipartisan among the american public. you've got at least 1/3 of republicans around the country liking his prescriptions. that is where he says he's having -- do you think they are campaigning on this idea that he can get it done on capitol hill? greg: we've got another election

in the fall of 2022. they know they've only got maybe two or three quarters to get everything done that they want, and then we just get into campaign mode. so yes, he's changing the goal -- jonathan: bit of a connection problem there. just sit tight for a couple of seconds and we will try to reestablish that connection. that's the issue right now, they can't get it done in a bipartisan manner. you move the goalposts, change the language, talk about unifying the country and not unifying congress. lisa: and you talk about how much they want to get done at a unilateral standpoint given that they do have to reunite the party. it is not just this 2.25 trillion dollar stimulus proposal. it is also the budget that president biden but out there, and you are seeing the budget be more than $100 billion more than the previous one without the

infrastructure spending. greg, i think we've got a better connection. there's a question here about what that means for inflation. you said the red hot housing market is the canary in the coal mine. please explain. greg: everywhere we go, and california right now, if you see a house you want, you have to offer more than the asking price. you have to throw in an extra 2% or 3%. if you saw the fed chairman last night, i think he is still very sanguine about inflation. i think he's wrong on that. lisa: i've got to say, this to me is one of the key issues we deal with everyday, this question of the amount of money being thrown both by the federal government, as well as the monetary support. how can it not lead to inflation? jonathan: it is not just about supply. it is about what using that supply will achieve.

if a supply issue is used in the united states to cover up the deficit, that is a problem. right now it is being used to generate a boom in economic activity. greg, why do you disagree with the chairman of the federal reserve on this hot button issue? greg: you see bubbles everywhere, number one. number two, i feel strongly the by the end of the year, unemployment will be a little under five cents. that is getting close to -- under 5%. that is getting pretty close to full employment. that could begin to percolate wage pressure. jonathan: whatever they think for limp is. that debate is still the ongoing -- they think the limp lehman to his. that debate is still ongoing. thank you. this federal reserve is talking about substantial progress before they make another move.

what is substantial progress? right now they haven't defined it. i think like tom porcelli said with us on friday, that is a feature right now, not a bug. they are taking advantage of the market not being on the same page. that could change in one report. tom: all of a sudden, you are going to get a data stream, and then you start setting up those benchmarks of wind do you go. i am looking at inflation as the mover from transitory. jonathan: whether supply will be held back because of being tight on the indices in the last 12 months. [indiscernible] they think they cannot burn hotter. this time around, you have this massive effort on the fiscal side to help provide relief for people who haven't been able to look for a job that can look for a job now. i think the conversation at the moment, it is a debate whether

those people start to look for a job in the next several months. lisa: it gets to the idea that people are getting income, but the question of lack of slack in the market is a question right now. jonathan: bill dudley will join us next on this program. on radio come on tv, this is -- on radio, on tv, this is "bloomberg surveillance." ♪

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jonathan: 60 minutes away from the opening bell. equity futures down around .1%. on the nasdaq, a massive week of gains last week. three point 9% on the nasdaq 100. right now futures negative one third of 1%. let's get to the bond market. we touched on credit earlier. equities all-time highs, credit spreads as titus 3% less than that. even with a ton of supply on the credit side. as barclays pointed out and tony rodriguez pointed out, 72 percent of the year to date issuance in high yield is revamp financing -- is refinancing. the biggest portion of supply for refinancing 2003 according

to barclays. the treasury sorry, a loss of supply -- the treasury story, loss of supply for the sovereign. tens 1.67, 30's 2.53. maria tadeo drop me in email from brussels, our colleague, 500,000 daily vaccinations in france. in germany, around 700,000. it is important and starting to change the dynamic of the conversation around euro-dollar. this time last week 1.17, right now 1.19. it is a good change. the numbers in america it are great. the numbers in europe are improving and that could be a source of upside surprise. tom: something to watch. also what to watch was chairman powell's comments on 60 minutes. john and lisa want to speak to bill dudley about where we are with the fed. we make jokes about transitory but it is shocking to see the

fiscal stimulus we have right now. bill dudley is a former federal reserve bank president of new york. buried was his exceptionally important essay for bloomberg opinion on the banks and leverage. it harkens back to the summer of 2004, is codified by simon johnson in his book 13 bank errs , when the sec around the broker-dealers to become more leveraged. this is not like 2004 where you say these are banks that need to be free from regulatory restriction. bill: it is completely different. their balance sheet is becoming more tight because the fed is buying treasury securities and boosting the amount of reserves in the banking system. the banking system cannot make any choice about whether they will hold the reserves collectively. as the system goes up, the leverage ratio -- tom: how is jamie dimon or other

bankers, how are they restricted now? bill: the leverage ratio has not bound tightly for many banks but it will become more binding as we go from now to the summer because reserves in the system will go up dramatically. what will happen at the big banks as they will try to push deposits elsewhere. they will not want to take corporate deposits. that induces unnecessary friction in the system are no net benefit. it is pretty obvious, why do you make an adjustment for the leverage ratio to take into account the fact the fed is driving the amount of reserves in the system, not the banks. lisa: how uncomfortable is it to be arguing to reduce regulatory pressures on banks at the same time we are dealing with the archegos fallout? bill: reserves of the federal reserve are not risky assets.

we are not talking about an exemption that is reese's bank risk. -- that increases bank risk. we can just raise the leverage ratio requirement from 5% to 5.5% on what is left. the point is reserves are not risky and the banks cannot control how many reserves they hold. lisa: moving beyond this particular point of regulation, talking about the leverage ratio , you've talked about concern about leverage building up in the shadow banking industry, about a lack of regulation in that area of financial markets. do you still see this as a concern and a pressing one or simply something to deal with later on? bill: i think it is pretty pressing. you think about what happened last march, basically the federal government had the rescue the money market mutual fund industry again. problems in the corporate bond space. more recently, we had documents

issues. we like the nonbank financial sectors still rife with issues that need to be dealt with sooner rather than later. tom: i need to switch to the present fed discussion. we have been making jokes about transitory. you and i have talked before about the british pretense of short-term, medium-term, long-term. now we have a transitory thing as we move along the x access. does any of this make theoretical sense or are we just kidding ourselves, massaging the unknown? bill: the fed is being patient for a couple of obvious reasons. one is we are not sure where full employment is pure two they are not sure where -- how fast inflation will rise. number three, they're worried about inflation expectations becoming unanchored to the downside because the fed has not been able to achieve 2% inflation for some time.

the change in policy is well motivated. the risk is the federal be great. before the fed try to type monetary policy to arrive at 2% inflation rate. now they will not even start to type monetary policy. the fed will be much slower to tighten this regime and prior regimes and that does great risk for the economy. jonathan: you state is a risk they will be late. isn't it a commitment they will be late? bill: the question is how late they are making a commitment to be late. how high will have to raise short-term rates to keep inflation from continuing to accelerate? the risk is recession will be more likely at that point, because the fed will have to move to a tightened monetary policy if they follow this framework. jonathan: this is a huge issue. the most important question we can ask, and we asked it on

friday, fed officials, how will they know they are wrong? if you are back on the fomc, how would you know if you are wrong? bill: at the end of the day, they will look at the bubble we will see inflation, mostly due to base effect and frictional costs as you reopen the economy, they will be focusing more on the labor market. how many people are still unemployed compared to where we were in march of 2020? right now we have a shortfall of employment of about 9 million people in the fed will be tracking that very carefully. then the fed will dark to not focus on the transitory effect -- what they are most concerned about is at what point do you get to such a tight labor market that it generates wage pressure. lisa: fed officials have said they have the tools to combat inflation higher than it acted. -- higher than expected. do they have the tools to deal with financial disruption after

the surgeon risk-taking? what happens as a result of the tightening of fed policy? bill: you are raising an important question. when the fed goes from very friendly to unfriendly they will have an adjustment and the adjustment could be severe after a long period of low interest rates. i do not think the fed cares about the stock market level, per se, but they do care if the stock market were to collapse. the fed does care about financial conditions and terms of how they see the performance of the economy. the fed is not going to run to the rescue because the stock market moves down. lisa: it raises a question of whether if the fed will tighten in the near term because they see things are getting ahead of their skis, or they try to take action to combat inflation, could they torpedo markets already at heady levels? do you feel your colleagues are considering that or is that not

as significant as getting the market and the economy back on its feet? bill: chair powell has made it clear the fed will not be preemptive. what they are concerned about is getting the 8 million to 9 million people back to work as soon as possible. that is the focus right now. that creates a risk to markets when the fed has to shift gears and start to worry about inflation. that is probably several years off. tom: in our great debate, do we still underestimate if wage inflation does not move because of the new technological impulses we see in our economy? bill: that could be a factor. we are running an experiment. tom: well said. bill: we will see how it goes. this experiment has more uncertainty than usual because we have never had a recovery from a pandemic before, going back more than 100 years. anybody who tells you they know

how the economy will perform over the next year does the is not being -- the next year or two is not being honest. we've never had an economic recovery like this one fueled by massive monetary policy stimulus. jonathan: before you go, an important question. mohamed el-erian asked it on bloomberg opinion. did the fed shift policy lanes at the wrong time? do you think they made the shift prematurely? i wonder if they had known what was about to happen on the fiscal side whether they would have made this change? bill: i think they would've made the change in any case because they were worried about inflation expectations and they had such a poor record of forecasting what level of employment is full employment. i think they would've made it no matter what, but i think mohamed el-erian's piece is a good one because he points out there are risks to the new strategy. the fed could be late and if the

fed is late they left a slam on the brakes and that could have consequences not just for the economy but financial markets. jonathan: looking forward to catching up with both of you later this week. bill dudley, former federal reserve bank of new york president. so many issues. this federal reserve is unwilling to risk being early so they are committing to being late former president dudley raises the important question, it is a matter of how late they will be and how much damage that will do. tom: to me it is just a game. they are always after-the-fact. now they are going more after after-the-fact. there will be a point where they are after after after-the-fact. we have seen this before. jonathan: we have seen this before. we will continue discuss this with kathy jones a little bit later on bloomberg tv. i will do that next hour. i will run away.

as we get set up for the rest of the week, i will get set up for the show. tom: jon ferro, thank you for joining us. joining us and i from bloomberg intelligence as we look at microsoft going after one of the software providers. nuance makes smart speech recognition. they will be taken out. it is a small for microsoft, one percent less of the balance sheet. why do they need to do this transaction? >> if you look at it, the pandemic has led to transformation across all sectors, health care being one. if you look at the world today, telehealth will be a big deal. in september microsoft announced a partnership where there teams product can be used by patients and doctors to interact. this other software by nuance

would transcribe that conversation, so you do not need to take notes after the discussion, you do not need to send the video. as you're talking it starts typing back the conversation and saves it as a file for you to review. tom: lisa, this will be great. you will turn to the software and go take two aspirin, call me in the morning. lisa: having covered health care in a former life, this would be a game changer for a lot of doctors whose brand a portion of their day transcribing to make sure they have the right record. there is an obvious reason microsoft would want this. it'll be the biggest acquisition since linkedin. is there any antitrust concern at a time both democrats and republicans are saying this is a concern? >> if it was any other company i would have said yes. if it was google, alphabet, amazon. for some reason, microsoft when

it buys a company like this with a tiny revenue base, this company generates about $1.5 billion in revenue, it is not that big. i do not think so. having said that, it will be fun to see how this administration takes a look at many acquisitions in the marketplace. lisa: is this the beginning of a series of acquisitions for microsoft? there have been other rumors. >> it has been around here at we have not seen -- it has been around. we have not seen that big of an acquisition. think about why microsoft is buying some these companies, to improve the functionalities of their own products. this company has huge ramifications not just for the health care stock, imagine being able to order your office, do the work for you using voice commands. the technology is what microsoft

is going after, and i expect not just microsoft but others to be part of it as well. tom: was this an offense of or defense of acquisition? did they make this so apple would not buy them? >> absolutely not. i think this is very offensive. they are investing into the health care area. as i said, health care is an industry that lags everything else, it is so behind retail, banking. what we have seen because of the pandemic, you need to be digital. we think it is going to be a big deal for the health care industry and we expect more from here. tom: thank you so much. we will have much more on this, particularly bloomberg technology this evening. nuance technology picked up by

microsoft. huge equity gains and also huge cash on the balance sheet. this is a conversation we wanted to have for days. with the passing of robert mondale. you've heard me say that the lineage of our international economics goes back through's chicago of long ago and jacob frenkel. we are thrilled he could join us this morning. he is the group of 30 chairman of the board of trustees. jacob, we had a wonderful friday with ken rogoff, richard clarida, and angus deaton talking about the 20th century are national economic spirit when you were writing at chicago , what did you learn at columbia from mundell? jacob: to begin with, when i came to chicago, 1968, mondale was a superstar. we were students together --

mundell was a superstar. we were all hypnotized by the way he changed completely the way in which the economic profession looked at the economy. at that point the world was viewed in the textbooks as a closed economy. yes, it had some into with other countries through trade, but by and large it was a closed unit run by the policymakers of that unit. mundell said the only closed economy real is the world. each country within the world -- therefore in order to understand how the economy works, we need to develop a new approach, which is called open economy. it means you cannot conduct

monetary policy under the assumption your closed unit. tom: because of time, i want to drive this forward to the modern age. your work with jp morgan and jamie dimon and the team and your work with group of 30, you have been the architect of so much of our discussion of an open economy. as jamie dimon mentioned in his letter the other day, does america have a chance to lose our open economy advantage? jacob: it depends if it keeps the open economy perspective or it closes itself. the only way a country can succeed, small or large, in the interconnected world is by being open to benefit from the better things other countries do and

benefit other countries by the things we do you the principles of comparative advantage point ages ago by adam smith are still relevant today, but even more so because capital markets are very interrelated. capital markets are moving by expectations. expectations are being fed by announcements, and announcements are affecting the economy by the credibility. all of it together means we cannot afford playing the game of isolationism. anyone who would try to do it will be penalized by the market. i believe that by now there is greater understanding that when countries are trying to close themselves, accused of trying to protect its own citizens -- under the ruse of trying to

protect its own citizens come as a matter of fact they hurt their citizens because they do not allow their citizens to benefit from world knowledge. lisa: this used to be a common thought, a common belief. it has become less so. there has been more isolationism. i wonder how much pushback you are getting even from members you talk with among the group of 30 that perhaps globalization does not help everyone in the same ways and certain things need to be done in a more domestic capacity, especially as we see the supply chain disruptions? jacob: absolutely. the main lesson is not to throw the baby with the water tub. it is globalization -- if globalization is not perfect -- ask yourself what is not working? what was not working is the benefits were not widely shared. you see the agenda for government to make sure the benefits are widely shared. that is the essence of policy.

it is not the case against opening the windows. you open the window, you may get some storms. make yourself more robust. if you close the window, you miss the smell of roses. lisa: are the benefits from globalization the same now as they were 20 or 30 years ago given how much pay has evened out, given how much wealth has spread out around the world? we do not have the same china today we had 30 years ago driving prices down. jacob: 30 years ago we did not know china would, and here it came. you could've said 30 years ago globalization has exhausted. when you look today, we have experienced the pandemic. we have experienced the fact that pandemics did not recognize borders. that knowledge is an

international public -- the vaccinations are to be shared. the mechanisms need to be in place. by and large, globalization will come from different places in the coming years. in the climate area. tom: it is such an honor to have you on right now. adam posen of the peterson institute announced the death of john williamson. i cannot think of someone i would better talk to at this moment then you. john williamson was a micro economist spanned all of economics, including macro economics in his founding in 1989 of the phrase the washington consensus. every bit of your work identifies what williamson

wrought. do we have a washington consensus today in honor of john williamson? jacob: to begin with i want to share adam posen's sadness and sorrow with the death of our good friend john williamson. the washington consensus was a concept developed about the notion there was a consensus of all it takes to be a successful economy. today we do not have the washington consensus. the reason is that especially since the great financial crisis , subsequently with the subsequent crisis, seems to be policymakers in many places of the world have lost their compass. if you lose your compass you cannot have a consensus about a strategy. i think the challenge today is

what are the basic principles that are robust and what are the things that can be pushed aside? i still think the issue of globalization, of openness, of making sure globalization succeeds, of making sure the benefits are shared, of making sure the machinery is in place to bring about the sharing of the benefits, this has to be a strong fiscal system, a strong tax system, and a very independent monetary policy looking at the long-term and not the short term. mundell was a farsighted economist. tom: on mundell, on williamson,

jacob frenkel, we are honored to have you with us. former governor of the bank of israel. we get so fortunate when we have our guests on. today we saw a lot of positive tone on equities and on the price of fixed income. lisa: this is a faith-based market. this is a faith-based market we will not get serious inflation beyond transitory. it will be transitory. that is the belief, and i will see how may times i can get you to drink, you just toss that cup over your shoulder for all of the people listening on radio. people believe in a bull market without the inflation so many are worried about. tom: that is the set up for this morning and that set up will be tested by the economic data. much more through the week with inflation and retail. futures negative five, very stable. barely off the surge we saw on friday, 17.06. coming up, the gentleman from

st. louis, james bullard of the st. louis fed. stay with us on radio, on television on this monday. this is bloomberg. ♪

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from york city for our audience worldwide, good morning. the countdown to the open starts right now. equity futures -.1%. we begin with the big issue. can the data meet high expectations? >> very lofty expectations. >> the second quarter is a turning point. >> the key is not just the earnings season. >> does the data continue to exceed expectations? >> everyone is freaked out about short-term data. >> the risk is higher inflation. >> the prospect of sustainably higher prices. >> is the earnings reports come in. >> a lot of noise coming through the inflation data. >> earnings need to be strong. >> the concern is if the liquidity paradigm changes. >> everybody thinks a little bit of inflation or higher rates will end the party. >>